Machinery Industry 2015 Outlook

Most experts in the industry and the person in charge of the machinery manufacturing enterprises agree that the basic view of the operational status of the machinery industry this year is that the demand is slowing down and the transition is being forced to transition; there is progress in stability, progress in the economy, and the situation is basically probable; the situation in the next year is still severe.
The machinery manufacturing industry is a traditional and cutting-edge industry. It is also a typical midstream manufacturing industry. The attributes of its investment products are very clear. The investment in downstream fixed assets, including real estate, manufacturing, and public infrastructure, is closely related.

Due to the influence of these three major sectors this year, the machinery manufacturing industry still focuses on structural investment opportunities. The reporter learned from the China Machinery Industry Federation that the growth rate of the machinery industry's production and sales will be between 10% and 15% in 2014, and the profit growth is expected to be around 10%.

Most experts in the industry and the person in charge of the machinery manufacturing enterprises agree that the basic view of the operational status of the machinery industry this year is that the demand is slowing down and the transition is being forced to transition; there is progress in stability, progress in the economy, and the situation is basically probable; the situation in the next year is still severe.

Experts in the industry reminded machinery manufacturing companies that the machinery industry's slump in the past two years was due to weak demand and overcapacity. However, this is only the cause of the situation. The more fundamental reason is that the country’s economic development stage has undergone profound changes, but The industry development model has not changed along with it.

Accountability of common accounts receivable At the end of the year, a mechanical manufacturer in Shandong, Zhang Jie (a pseudonym), was busy pushing accounts. The difference from previous years was that this year's call for accounts was pushed earlier than in previous years.

“You don’t push any way. Someone owes me money. I owe money to others. Some project projects give me advancement. I give advances to others, and they are all part of a ring.” Zhang Jie said.

Zhang Jie told this reporter that this year's machinery manufacturing environment is not very good. “According to me, some companies have continued last year’s decline in revenue, various expenses have risen, and receivables have increased. The situation of capital turnover is difficult for enterprises, and in general, the decline in corporate profits is very common."

The reporter learned from the report of the China National Machinery Industry Federation that due to the inconsistency of business conditions and scales of some major companies, the various costs have remained high, coupled with the current increase in cost, resulting in a decrease in business costs and operating income. Not synchronized.

Experts in the industry believe that many changes are taking place in the development stage, industry structure, industry structure, demand structure, and profit model of the machinery industry, and the differentiation between the industry and enterprises has increased significantly.

Among them, demand growth has slowed down, management's steady growth intentions have been highlighted, and steady growth and restructuring have taken place during the latter period. The growth rate of industry profits began to decline after a relatively high growth at the beginning of the year, which was mainly due to the slowdown in demand growth and the increase in cost rigidity. As the scale base increases, the difficulty of achieving growth will increase, and the pressure of the market to force industry transformation and upgrading will continue.

Zhang Jie is complaining about receivables. “Accounts receivable is a common universality of the industry that can be allowed to exist, but it cannot be allowed to develop because its development is not good.”

Zhang Jie said that machinery manufacturing companies usually adopt an instalment payment method, and once the mechanical industry enterprises have formed account receivables under the credit sales model, the total amount of accounts receivable is greater than other industries.

"Member manufacturing enterprises, especially large-scale Equipment manufacturing enterprises, account for a large proportion of total assets in accounts receivable. The proportion of total receivables of enterprises accounting for total assets reflects the company's business risks. The greater the ratio, the more companies face The greater the operating risk," said Zhang Jie.

In addition, Zhang Jie also told this reporter that machinery manufacturing companies have the characteristics of long production cycle, long transportation time, complicated equipment installation, and long product operation time. “The complexity of machinery and equipment products determines the length of the repayment period, the construction machinery industry with a small unit price of equipment, and the payback period for accounts receivable in the internal combustion engine industry are generally within one year. The unit price of equipment is high and the production cycle is long. The recovery period of accounts receivable in the CNC machine tool industry is generally between 1 and 3 years. The recovery of accounts receivable is long, which increases the risk of recovery of accounts receivable.

Change in demand patterns Cai Weici, executive vice president of the China Federation of Machinery Industry, said that the overall deepening of reforms puts higher demands on the ability of machinery companies to respond. “Let the market play a decisive role in the allocation of resources”, which implies unlimited opportunities for machinery companies, but it also increases the responsibility for own risks. Quite a number of companies that do not adapt to the new situation of reform will be eliminated. Machinery companies must greatly enhance their awareness of the crisis.

Cai Weici believes that the demand environment for mechanical products will hardly be expected to be looser this year than this year, and the contradiction between the slowing growth in demand for mechanical products and the rapid expansion of production capacity and the concentrated release will continue to rise; the severity of this situation and its economic operation for the next year The negative impact must have enough estimates.

Cai Weici expects that the growth rate of the production and sales of the machinery industry will be around 8% next year, the profit growth rate is expected to be around 10%, and the increase in foreign exchange earnings from exports is estimated to be around 6%.

Cai Weici pointed out that the demand pattern of the machinery industry is changing from an incremental main stock to a dominant stock index, the proportion of new construction and transformation projects is changing, the structural contradiction between traditional demand deficiency and emerging demand is difficult to meet, and the superposition effect will further aggravate the demand. Insufficient difficulties, the ability to adapt to changes in the market in R&D and market development are tested.

“As the international market share of China’s machinery products has increased, developed countries have restricted the entry of trade protectionism into China. At the same time, China’s traditional low value-added export products are being eroded due to rising exchange rates and competition from developing countries. Rapidly weakened, it should not be too optimistic about export growth,” said Cai Weici.